Attorneys' Fees, Class Actions, Federal Practice

Class Action Settlements at the Heart of Proposed Amendments to Federal Rule of Civil Procedure 23

groupFederal class action jurisprudence has been evolving rapidly over the course of the last 5-6 years, with several major U.S. Supreme Court decisions defining and redefining many aspects of class litigation. With the first round of proposed amendments in over a decade, the civil rule governing federal class litigation is set to follow suit. On August 12, 2016, the Judicial Conference Advisory Committee on Civil Rules (Advisory Committee) published proposed amendments to Federal Rule of Civil Procedure 23, which have been in the works since the 2011 formation of the Rule 23 Subcommittee. We began our discussion of the hot issues that may be the subject of proposed amendments nearly two years ago, when the Rule 23 Subcommittee began seeking input on the front burner issues it had identified. Since that 2014 list of initial front burner issues, a series of meetings and conferences have informed the Subcommittee in narrowing the suggested amendments to the class action settlement issues ultimately presented in this proposal. We highlight the substance of the proposed amendments below. You can review a redline of the proposed amendments here.

Proposed Amendments

The proposed amendments to Federal Rule of Civil Procedure 23 focus primarily on class action settlements, including notice requirements, settlement approval criteria, and dealing with objectors to settlements.

Rule 23(e)(1) Notice: The focus is on what information the court needs in order to decide whether to require notice be given to the class of a proposed settlement. The proposed amendment states that the “parties must provide the court with information sufficient to enable it to determine whether to give notice of the proposal to the class.” Giving notice must be “justified by the parties’ showing that the court will likely be able to: (i) approve the proposal under Rule 23(e)(2); and (ii) certify the class for purposes of judgment on the proposal.”

Rule 23(e)(2) Settlement Approval: The focus is on factors the court should consider in determining whether to approve a settlement, incorporating those developed by circuits courts in interpreting the “fair, reasonable, and adequate” standard established in 2003. The proposed amendment requires the court to consider whether a settlement proposal is fair, reasonable, and adequate based on consideration of whether:

  • the class representatives and class counsel have adequately represented the class;
  • the proposal was negotiated at arm’s length;
  • the relief provided for the class is adequate, taking into account: the costs, risks, and delay of trial and appeal; the effectiveness of the proposed method of distributing relief to the class, including the method of processing class-member claims, if required; the terms of any proposed award of attorney’s fees, including timing of payment; and any agreement [with objectors] required to be identified under Rule 23(e)(3); and
  • class members are treated equitably relative to each other.

Rule 23(e)(5) Objectors: The focus is on what objectors must include in objections and requiring court approval of payment to objectors and/or their counsel for backing down from their challenge of a settlement approval. The proposed amendment requires objections to “state whether it applies only to the objector, to a specific subset of the class, or to the entire class, and also state with specificity the grounds for the objection.” The proposed amendment also states that “no payment or other consideration may be provided to an objector or objector’s counsel in connection with: (i) forgoing or withdrawing an objection, or (ii) forgoing, dismissing, or abandoning an appeal from a judgment approving the proposal,” unless approved by a court after a hearing.

Rule 23(c)(2)(b) Notice: notice is permissible by electronic or other appropriate means,

Rule 23(f) Appeals: no immediate review of a court decision on whether or not to send notice of a proposed settlement, and allows additional time to seek interlocutory review if the U.S. is a party.

Areas for Further Study

The Advisory Committee also approved two areas that had been explored by the Rule 23 Subcommittee for further study: (1) defendants’ attempts to pick off named plaintiffs and moot class actions with offers of complete relief and (2) whether members of the proposed class are sufficiently ascertainable for purposes of class certification. Both issues continue to develop in the lower courts, as the Supreme Court recently denied review of cases presenting the ascertainability issue and the High Court’s Campbell-Ewald Co. v. Gomez decision held that an offer of complete relief to a named plaintiff does not moot a putative class action, but left open the question of whether depositing money into plaintiffs’ account changes the analysis.

The Comment & Approval Process

The proposed amendments will be open for public comment until February 15, 2017. For those interested in speaking on the issues presented, several public hearings will be held to discuss the proposed Civil Rules amendments:

  • Washington, D.C. (November 3, 2016)
  • Phoenix, Arizona (January 4, 2017)
  • Dallas/Fort Worth, Texas (February 16, 2017)

If approved, the proposed amendments would become effective on December 1, 2018. We will keep you updated on developments in the process.

Tony Lathrop

About Tony Lathrop

Tony Lathrop brings experience and a high level of analytical ability, professional credibility and creativity to handling litigation matters. He rigorously represents his clients' interests in a diverse range of claims and actions. A certified mediator, Mr. Lathrop has extensive experience representing business clients in mediation. His service to the legal profession in North Carolina has allowed him to develop relationships across the state that benefit the firm's clients.


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